ALEX BRUMMER: Elliot's assault on SSE threatens Britain's green legacy

ALEX BRUMMER: Vampire hedge fund’s assault on SSE threatens Britain’s green legacy

Britain’s record of nurturing climate change assets is not good. 

The most damaging recent example was when Theresa May’s government sold off the state-backed Green Investment Bank to the ‘Vampire Kangaroo’ Macquarie in 2017, for £2.3billion.

Aided by government guarantees, it was a big backer of offshore wind power and innovative green technologies.

Leader: SSE has embraced the climate change agenda by investing heavily to meet the UK target of 25% of power coming from offshore wind by 2040

Leader: SSE has embraced the climate change agenda by investing heavily to meet the UK target of 25% of power coming from offshore wind by 2040

Its successor organisation, the Government’s Leeds-based UK Infrastructure Bank, headed by former British Land chief executive Chris Grigg, is now seeking to put Humpty Dumpty back together again.

The assault by aggressive activist investor Elliott Management on power utility SSE looks ill-judged. 

SSE boldly has embraced the climate change agenda by investing heavily to meet the UK target of 25 per cent of power coming from offshore wind by 2040.

It is able to finance investment in cleaner energy through cross-subsidising. Its approach, on a different scale, mimics that of British oil major BP, which is using the proceeds of its fossil fuels to fund a radical transformation to green energy.

Elliott argues that, as a power conglomerate, SSE’s existing and future investment in offshore wind and other technologies does not get the valuation it would deserve as a separate company. 

As a stand-alone, it would also be more widely eligible for inclusion in fashionable green and ESG-compliant investment funds.

What Elliott neglects to point out is that after a split, the green arm would be a minnow. The cashflow which has speeded its growth would be cut, and its future ownership uncertain. 

It probably would be snaffled up by private equity, more interested in running the enterprise for short-term returns than long-run climate change.

Britain needs what the Aussie thinker Roman Krznaric calls the ‘good ancestor’ – investment in future generations. Elliott, with its laser focus on quickie financial returns, is the opposite of that.

This doesn’t mean that all the ideas in its ten-page combative missive to SSE are without merit. Its suggestion that SSE strengthen its board with the choice of two new independent directors with climate change expertise is sensible. 

Better for SSE voluntarily to move in that direction than to find itself under siege at its annual meeting, as was the case at Exxon in the US.

Elliott also has targeted SSE chief executive Alistair Phillips-Davies suggesting, after eight years, it could be time for him to move on. Maybe that will happen.

But the priority at present should be to keep the buccaneers at bay.

Growth for hire

The perennial complaint heard about the FTSE 100 is that it lacks pizzazz, and underperforms rival indexes.

That is not a sentiment which will be heard about equipment rental group Ashtead, which started life in Surrey in 1947 and now earns much of its income from its Sunbelt Rentals operation in the US.

Latest results show soaring profit and revenue in the first half as America bounced back from Covid and demand jumped for construction and farm gear. 

It again pleased investors by raising its revenue forecast for the full year from 13-16 per cent to 17-20 per cent. 

Share performance has been remarkable, the price almost tripling over the last 12 months, sending its market capitalisation up to £29billion, making it the best performing blue-chip stock.

Over the last decade, the shares have risen 4,000 per cent, the kind of eruption normally expected of Silicon Valley behemoths.

The performance of Ashtead makes one wonder what might have been for UK generators-for-hire specialist Aggreko, which slipped into private equity ownership this year – bought by TDR for £2.3billion.

Another case of UK plc sold short.

The Lion roars

UK fund managers want to be all things to all clients.

Abrdn took a big step into retail when it bought Interactive Investor last week.

Now Liontrust, which started as a retail brand, is increasing its exposure to institutional investment. It has snapped up stock-pickers Majedie Investments, boosting funds under management by £5.8billion to £42.3billion.

It follows the purchase of Robin Geffen’s Neptune Investment Trust in 2019.

Boutique managers once prided themselves in their independence.

Post-Woodford, size and good governance are more important.

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